The Construction of an Asset Index at Household Level and Measurement of Economic Disparities in Punjab (Pakistan) by using MICS-Micro Data

Abstract

The main objectives of this study are to construct a valid and reliable asset index at household level and to estimate economic disparities in 36 districts of Punjab (Pakistan) by using Multiple Indicator Cluster Survey micro-data. An asset index may be a better measure than current income or expenditure for gauging a household’s long-term capacity for buying goods and services and its potential resilience to economic shocks. This paper provides details of the results from Exploratory Factor Analysis (EFA) and Tetrachoric Principal Component Analysis (PCA) for the dimensional structure of assets. We have applied Classical Test Theory (CTT) and Item Response Theory (IRT) in order to construct a reliable household level asset index. In Punjab, Lahore has the highest asset index score followed by Gujrat and Sialkot. Gini-coefficient index and the Palma ratio analyses show that the asset distribution in the district of Rajanpur is highly unequal.